Many experienced individuals have taken the opportunity of redundancy, discontentment with their current position, or current economic conditions to take the leap of faith and start their own business.
As Australia has a wealth of talent in many industry sectors it represents a new breed of innovation and competition that is good for business. However, starting up a business always comes with its own risks.
There are many factors that contribute towards individuals going it alone and normally it’s because they:
- feel it is a good time to go into business. Individuals working in growth sectors want to take advantage of this and go it alone.
- can’t find a job.
- are disenchanted with the big end of town and want to explore their own business ideas.
- have numerous contacts they can utilise in establishing a successful business.
- want to control their own destiny.
- are buying themselves a job.
- need to generate income quickly to cover their personal liabilities.
- have found the opportunity for experienced people to come together to create a company.
What to do
There are critical ingredients for making your venture succeed. These include:
- considering from the outset whether you really understand what's involved in running your own business and whether you're suited to business.
- examining the reasons for getting into business - your goals and skills.
- determining the income your business will need to generate for it to be successful quickly; and
- determining the advantages and disadvantages of establishing your own business.
If you have considered the above points carefully and are positive about starting a business, then the starting point for any business to be successful is in its sales and the generating of revenue. This is the lifeblood of any business.
Once you feel comfortable about generating sales from your products or services then it is about how you manage the business to efficiently service those sales.
And once you have sales then you need to drive the profits.
There are two critical areas in making your venture succeed:
1. Operations (this is most critical)
You need to understand what it takes to produce or service your product, efficiently and effectively so the quality ensures people come back to continue to buy or use your product or service.
2. The internal management of your business
This is where you need to put structures in place that look at:
- The marketing methodologies you are implementing
- If you have the right people in the right jobs who will concentrate on helping build or maintain your business
- If you have the right IT infrastructure to service your business
- Your Financials – are they set up properly, running properly, are you getting accurate reports on a monthly basis?
- How are you managing the administration and office premises
For you to be able to continually produce your product or sell your service the backbones of your business need to be operating efficiently as well, otherwise the quality will be sacrificed.
Other things you need are:
1. a targeted strategy
2. key contacts you can leverage and / or help grow your business
3. focus, determination and drive
How to structure your new business
When structuring a business you need to consider:
- directorship agreements if going into partnership
- other people or investors from a share-holding point of view
- restraints of trade, i.e. any non-compete clauses or non-poach periods
A corporate structure is typical for most serious business owners, as it allows for limited liability up to the value of the share capital against directors or owners.
If you want a smaller operation then you may want to consider setting up as a sole trader or family trust type arrangement which would be easier to manage.
You also need to ensure your business is structured in a way that will minimise tax.
Pitfalls to avoid to ensure your venture succeeds
Many businesses fail due to:
Other reasons for failure
- not having the sales to cover the costs of the business
- very poor financial management such that the business is not profitable and they build liabilities they can’t pay
- not planning well in setting up the business – such as injecting limited capital into the business
- paying too much for an established business and undertaking poor due diligence
- As always if you are going to set up any business you need to acknowledge the importance of these areas.
a) the initial due diligence was not completed before commencement
b) no research was undertaken to see if:
Some final advice for starting up
- there was a real market for the product or service
- the business can get to that market
- the market will buy from the business
Make sure you have done some research into your business idea before you just jump in. It is important to identify the need for your offering and assess the risks and benefits.
Any decision you make in business needs to be done with a commercially minded focus, not based on emotional decisions.
If all the ingredients are right, go for it. Owning your own business can be an extremely exhilarating experience especially when you start to see it work and your business ideas come to fruition.
On the other side, if your business isn’t working be prepared to either get out early or commit the time and capital to get it up and running.
Remember, most businesses take five years to gain any real momentum and become established businesses.
Michael Derin, Managing Director, Azure Group, www.azuregroup.com.au
Where to go for help
Azure Group is a leading boutique chartered accounting practice offering short and long term solutions to your business through our unique technical and commercial service offerings. If you need help to monitor current and future cash flows and manage costs; manage increasing volume of complex tax compliance and corporate governance obligations; and make the right decisions at the right time, facilitated by accurate and timely financial information, planning and strategy, contact Natalie Jones on (02) 9238 1120 or email@example.com
Online Business Directory
NSW Business Chamber Online Business Directory connects you to thousands of businesses across NSW. With exclusive access to special offers and great deals, you will find a service provider, business partner or supplier who can meet your needs. Listing is open exclusively to NSW Business Chamber members. Visit www.nswbusinesschamber.com.au/Business-directory.aspx or call 13 26 96.
Educational seminars and workshops
NSW Business Chamber regularly runs educational seminars and workshops around topical business issues which are impacting businesses around our state. These events are not only a source of practical and useful business information for owners, operators and managers of small to medium sized business, but are also a wonderful opportunity to network. www.nswbc.com.au/eventscalendar
Editor: Charisse Gray firstname.lastname@example.org
Reviewed June 2013